"Globalization" and "Neoliberalism" J. Bradford DeLong http://www.j-bradford-delong.net/ [email protected] for the Chronicle of Higher Education From left and right alike we hear something called "globalization" condemned. The forces driving the world economy toward increased economic integration are sinister. On the left politicians like Democratic congressman David Bonior begin speeches by noting three things that come to the U.S. from Mexico--dirty trucks, drugs, and hepatitis. On the right politicians like ex-Republican Pat Buchanan blame a century-old conspiracy to deliver America into the hands of the international bankers--and somehow to Buchanan the bankers are always named Goldman, Sachs, or Rubin; never Morgan or Baker. In books with titles like The Case Against Free Trade: GATT, NAFTA, and the Globalization of Corporate Power, Ralph Nader and his coauthors tell us that increased international trade and investment are responsible for the ills of the American economy, from disappointing blue-collar wage growth to pesticide-laden fruit. These cries of alarm from left and right about the destructive consequences of rapid international economic integration were a constant part of the background. Then in 1997 and 1998 came the calamitous flight of capital from the previously fast-growing economies of East Asia. The East Asian crisis left almost every observer believing that the global marketplace was baldy out of control. Something was amok, it seemed, when traders in lower Manhattan could cause widespread bankruptcies and unemployment in Bangkok. The alarming crisis in Asia led to a swelling of the volume of a broad anti-trade chorus. This chorus, in turn, inspired a counter-chorus. Chin-stroking neoliberals apologized for the "excesses" of the market. They agreed that market forces are occasionally a little reckless in their roughhousing. But they stressed--like any owner of a Rotweiller--that if you only realized that you shouldn't make any sudden moves to disturb the animal, you wouldn't get bitten again. Now I am a card-carrying neoliberal: a believer that a bet on increased international economic integration is our best hope for rapidly moving to a truly human world, an advocate of NAFTA and GATT, a former not-very-senior official in the Bentsen and Rubin Treasury Departments, and a believer that those fighting to hold back world economic integration are or are the dupes of foes of global prosperity and liberty. But I also think that this bet on increased international economic integration is a bet. It is not a sure thing. And I think that it is less important to assure people that it is a good bet (although I think that it is) than to help people distinguish the light from the rhetorical heat. After all, there will be other bets and other policy choices to be made in the future. And to fail to understand what is going on now will diminish our chances of collectively choosing wisely tomorrow. So I want to turn down the volume. I want to approach ideologies of every stripe (including my own) with skepticism. For despite the gallons of ink tha thave been spilled, our understanding of what "globalization" is and what it will do is still primitive. The people whom you can learn the most from aren't those who claim to have the answers, but those who are still working overtime to ask the useful questions. The critics of free trade aren't necessarily wrong to be critical of the current state of the international economy. But they write tomes that seem to me at least to reveal confusion and fail to enlighten--instead they deepen the surrounding darkness. For example, Rolling Stone columnistWilliam Greider's One World, Ready or Not left me puzzled:.How could it be that when American-based corporations invested abroad, they harm American workers by stealing their jobs, while when German-based corporations invested in Alabama, they harm American workers by exploiting them to earn profits to be transferred back to Germany? What is sauce for the goose must be sauce for the gander. There are, however, some excellent anti-globalization books. The granddaddy of them all is Karl Polanyi's (1944) more than half a century-old The Great Transformation, published more than half a century ago. Polanyi--a journalist and refugee born in central Europe whose teaching career included stints at Oxford, Bennington, and Columbia--argued that the market economy erodes the web of relationships that holds human society together. The market for labor pressures people to move around the globe to where they can earn the most--creating strangers in strange lands. The market for consumer goods rewards people for being fortunate or for responding to the incentives--making status a product of market forces rather than the result of social norms or visions of distributive justice. Moreover, Polanyi argued, the market's undermining of social order threatens to destroy the very societal and institutional structures on which the market economy rests. Now you can disagree with Polanyi, or with his values, but even a card-carrying neoliberal like me finds his arguments hard to dismiss completely. Consider hate crimes committed against Turkish workers and their families in Germany, or women working in New York's garment industry who cannot both provide for their extended families in China and raise their children--and so send their babies back to China to live with their grandmothers. Consider the extent to which special-interest politics means that it is not the government that regulates the market but the market's oligarchs who regulate the governments. More recent works have provided intriguing updates to Polanyi's argument. The Work of Nations by Robert B. Reich, who went onto become Clinton's Secretary of Labor, focuses on the dangers posed by globalization to America's sense of community and to the political order established by Roosevelt's New Deal. According to Reich, in the future America's blue-collar workers will be unable to share in the relative prosperity made possible by American inventions and America's resources: the need to keep the blue-collar assembly line near the research and design labs is rapidly vanishing. And the only way to reverse growing income inequality is to massively upgrade the educational level and skills of America just as universal high school in the early twentieth century gave America then the most literate and skilled labor force in the world. Saskia Sassen's (1998) Globalization and Its Discontents speculates on how the "new mobility of people and money" is about to lead to increases in relative inequality within the narrow spaces of modern post-industrial cities. You can applaud migration from the world economy's periphery to the core. I certainly do, as do almost all economists. Few economic processes do more to enrich the world than to move unskilled workers from places were they earn $0.50 an hour to places where they earn $5.00 an hour. And those who move benefit, as their vote-with-their-feet shows. But market forces do not construct the social capital to make high-inequality post-industrial cities truly liveable. In response to such critiques, the neoliberal political establishment--the Brookings Institution, the Progressive Policy Institute, and the Century Foundation--assures us that critics of increasing international economic integration are suffering from an irrational fear: Globaphobia is what they cal it. International economic integration--driven by rapidly falling transport and communications costs--is both inevitable and beneficial, argue authors Robert Litan (of Brookings), Robert Z. Lawrence (now a member of the Council of Economic Advisers), and Robert J. Shapiro (now Undersecretary for Economic Affairs at the U.S. Departmetn of Commerce). The only question is how quickly governments are going to learn to adjust to that integration, and learn how to benefit from it. The benefits of this "globalization," according to the neoliberal argument, are threefold: · Both the nations comprising the world economy's industrial core and those in the developing periphery benefit massively when the capital-rich core (where interest rates are low) loans to the capital-poor periphery (where interest rates are high). · Consumers benefit when lower transport costs and reduced tariffs make goods produced far away more affordable. Producers of goods that are exported gain as well because they sell into a wider market. Producers of goods for home consumption do not gain, but there is nothing like competition from abroad to keep them on their toes, alert to ways in which they can improve efficiency and better satisfy their customers. · The more internationalized the world economy, the more use producers in each country can make of commodities and production processes invented elsewhere. Faster diffusion of knowledge raises the level of productivity and technology worldwide. Thus globalization leads to a richer world, and to a more vibrant and tolerant world as well. Governments should not fight globalization, neoliberals contend. Instead they should embrace it. To a poor country hoping to develop an industrialized economy, neoliberals outline several incentives to embrace the global market. · In the past it might have made sense to impose tariffs to protect so-called "infant industries" or cushion economic instability. But in the information age, an integrated global marketplace will accelerat the transfer of technology. And it is only by accelerating the transfer of technology that poor countries have a chance of growing rapidly. · The industrial core has lots of money to lend to the developing periphery. Economies should embrace such inflows of capital, for they provide an opportunity to cut a decade or more off of the half-century process of industrialization. · Removing trade barriers reduces the scope of the government.